Release: March 25, 1980, 12 Noon PROPOSALS FOR RENEWAL OF FEDERAL TESTIMONY OF DR. JOHN TEPPER MARLIN, PRESIDENT, COUNCIL ON MUNICIPAL PERFORMANCE, BEFORE THE SUBCOMMITTEE ON GOVERNMENT OPERATIONS, U.S. HOUSE OF REPRESENTATIVES, WASHINGTON, D.C., MARCH 25, 1980 PROPOSALS FOR RENEWAL OF FEDERAL REVENUE SHARING John Tepper Marlin It is a pleasure to share with you some of the results of the work of the Council on Municipal Performance, which I have headed for the past seven years. With me today to help answer your questions is Peter F. Rousma niere, Vice President of the Council. First, I would like to discuss the problem of ensuring accountability for unrestricted financial grants to states and local governments by the Federal government. By coincidence, Britain is considering renewal of its own program of grants to localities on an almost identical schedule to renewal of revenue sharing now before the Congress. I have interviewed many key officials and commentators in Britain and believe their experience can be helpful to the Congress as it considers the proposed new legislation. Second, I will present some specific proposals, approved for the most part by the Board of Directors of the Council. Rationale for Revenue Sharing In both Britain and the United States, the concept behind revenue sharing was to link unrestricted grants to the needs of localities. The British Rate Support Grant was passed in 1969 and our version passed three years later. In both countries, complex formulas were proposed to estimate local needs, but the primary factor being used to compute state and local aid has been population. In both countries, local governments insist that they are better at spending tax money, but prefer to have the central government raise it. In Britain, local authorities say that they face much more protest over the 40 per cent of their spending that comes from local property taxes than over 67-441 O - 80 - 16 the 60 per cent of the spending that is paid for by the central government. In both countries, revenue sharing programs are favored by those who are attached to small-scale democracy and by those who are somewhat disenchanted with the ability of the central government to administer all of its spending programs efficiently and effectively. In both countries, the more liberal and more conservative ends of the political spectrum have had common traditions of small-scale democracy. Liberals can trace their antecedents back to local guilds and locally based labor unions or to socialist communes. The Democratic Party has grown up on the foundation of strong neighborhood service units, especially in the big cities. Conservatives similarly venerate village self-government and tend to extend the general principle of the less government (consistent with maintaining the peace) the better to the less centralized the government the better. Britain's conservative Association of County Councils has always fought proposals which would increase centralized controls over localities. In this country, the John Birch Society opposed Proposition 13 out of fears (well-grounded, it turns out) that the effect would be to transfer power from local schools and other institutions to the State of California. The Current Problem of Accountability In the context of frighteningly rapid rates of inflation, Congress is properly seeking to cut back or tighten up its spending. Revenue sharing is facing scrutiny along with many other programs. The main friends of revenue sharing are associations of states and local officials, like the National League of Cities and the National Conference of State Legislatures, which have made renewal of revenue sharing their top priority. It is easy to make the case that in the present climate of opinion unrestricted Federal grants are insufficiently accountable to the public. Proposition 13 type initiatives are signalling that voters would be happy to have any surplus tax money returned to them. A British writer, Arthur Seldon, goes so far as to argue that it is wrong for one level of government to provide unrestricted grants to another, and that this policy betrays the confidence which the public placed in the grant-making government. Governments should spend the money they raise, and raise the money they spend. "It's a shell game," he said to me recently. "If the central government gives money to a local government without specifying what it's for, we see an increase in central government power and a diminution of the overall accountability of government. Meanwhile, localities that accept the money are selling their birthright." How, I asked Seldon, would localities make up the difference if they suddenly lost all this "free money"? Seldon's answer was to sell me a copy of his book, Charge, which shows local governments how they can substitute fees for the services they render in place of taxes. Ending revenue sharing, however, would cause acute dislocation, especially in the hard-pressed large cities. If Congress chooses to continue the program, there seem to be two alternatives to increase accountability for the money: (1) Tighten up central controls on how it is spent, or (2) Tighten up central requirements on overall municipal accounting, auditing and reporting. Or both alternatives could be pursued. The first approach would make states and local governments more accountable to the Federal government for the money, but would undermine some of the reasoning behind a program of unrestricted grants. The second would make them more accountable to their own particular electorates, and would preserve the local of the program. |